On 22 October 2020, Rishi Sunak announced an update to the Job Support Scheme as we all continue to be affected by the COVID-19 restrictions.
This is an update on last month’s Winter Economy Plan, which included the initial unveiling of the new Job Support Scheme.
This was intended to replace the furlough from 1 November. It wasn’t as generous as the furlough scheme, with the intention that it should only be used to preserve jobs that were viable in the long-term, rather than simply delay redundancies.
However, at the time, a lot of people thought that it didn’t go far enough and didn’t actually provide enough support for many employers to actually uses it. I’ll admint I was one of them!
And, with the new three tiers of restrictions leading to closure of businesses and reduced trade for others, more cash is desperately needed to support businesses and jobs.
So, what has changed?
Watch our video or read about it below.
EMPLOYERS & EMPLOYEES
The furlough scheme was due to be replaced by a new Job Support Scheme for 6 months from 1 November.
There will now be two Job Support Schemes to reflect different needs:
- Job Support Scheme Closed for businesses legally forced to close due to legal restrictions
- Job Support Scheme Open for other businesses
So, how do they work?
Job Support Scheme Closed
This scheme is for businesses legally required to close due to coronavirus restrictions, for example pubs and bars in Tier 3 areas.
The Government will pay 67% of the employees’ usual wages.
The employer will simply pay Employers National Insurance and Pension contributions.
So, that’s relatively straightforward.
Job Support Scheme Open
This is a bit more complicated!
The idea is that the scheme will support businesses where employees are on reduced hours, for example due to the 10pm curfew, or simply because there is less business about.
The Job Support Scheme will allow employees to work part-time, with the Government part-funding the remainder.
To be eligible, an employee must work for at least 20% of their normal hours. For any hours that aren’t worked, the cost will be split:
- 62% paid by the Government
- 5% paid by the Employer
- 23% will be unpaid
This effectively means that the Government will fund up to 49% of an employee’s wages.
The employer will still pay all Employers National Insurance and Pension contributions.
The maximum Government funding will be £1,542 per employee per month.
Employers will also still be eligible for the £1,000 Job Retention Bonus for any previously furloughed staff who are still on the payroll through the Job Support Scheme as at 1 February 2021.
What businesses are eligible?
All small and medium businesses with a payroll are eligible. They do not need to have used furlough before.
Large businesses will need to show a drop in turnover due to COVID-19. The precise details haven’t yet been announced.
Which employees are eligible?
Any employee who was on a payroll reported to HMRC by the end of 23 September 2020. This was the date of the original Job Support Scheme announcement.
This does mean that an RTI submission must have been made to HMRC by that date so, for monthly employees, the cut-off was effectively 31 August.
How much will the funding be?
To give two examples:
Example 1 – Employee works 20% of the time
If an employee earns £1,000 per month and only works 20% of the time:
- The first £200 is paid by the employer for hours worked
- For the remaining unworked hours, £40 is paid by the employer and £493 by the Government, leaving £267 unpaid
In total, the Employer pays £240 and the Government £493. The employee receives a total of £733.
Example 2 – Employee works 50% of the time
If an employee earns £1,000 per month and works half of the time:
- The first £500 is paid by the employer for hours worked
- For the remaining unworked hours, £25 is paid by the employer and £308 by the Government, leaving £167 unpaid
In total, the Employer pays £525 and the Government £308. The employee receives a total of £833.
WHAT DOES IT MEAN OVERALL?
I do think the revised Job Support Scheme is much better than the initial announcement last month.
In that scheme, employees needed to work at least one third of the time and employers were paying 55% of the salary for someone working 33%. The Government then added 22% for the employee.
I didn’t know many business owners who actually intended to that scheme as most thought it wasn’t worth it. They were more likely to simply pay the 33% and ignore the scheme….or make people redundant.
It was too costly to keep part-time staff on.
The new scheme does redress that. Someone working 33% of the time will receive 78% of salary, but only 36% will be paid by the employer. 42% is now covered by Government.
This is a far better incentive to keep staff in jobs.
The idea is that the £1,000 Job Retention Bonus should keep it cost neutral for employers after NI and pension contributions.
Overall, this will be a help for businesses and workers.
If you found this useful, please share it using the icons at the side of the page, or leave a comment below.
If you’d like a meeting or a Skype call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at email@example.com